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Net Revenue reached R$12 billion Growth of 7% in thermoplastic resins sales in the Brazilian market from 2Q14
HIGHLIGHTS:
In 3Q14, the average cracker utilization rate stood at 90%, increasing 6 p.p. from 2Q14. The resumption of operations at the Triunfo site after its scheduled maintenance shutdown and the better operation at
the Rio de Janeiro complex offset the scheduled shutdown at the São Paulo cracker.
The Brazilian demand for thermoplastic resins (PE, PP, PVC) was 1,374 kton, up 5% from 2Q14,
explained by the better performance of the consumer goods sector and third-quarter seasonality.
Braskem’s sales followed the market trend and reached 939 kton.
Sales of PP in the USA and Europe business unit amounted to 470 kton, down 2% from 2Q14, reflecting
the slowdown in the European market.
Braskem recorded EBITDA of R$1,502 million, benefitting from higher spreads in the international
market and the growth in total sales volume. Compared to 3Q13, EBITDA decreased 10%. In U.S. dollar, EBITDA in the quarter amounted to US$660 million.
The Company´s leverage, as measured by the ratio of net debt to EBITDA in U.S. dollar, stood at 2.71x.
In October, Fitch revised its rating outlook for Braskem to "stable," reflecting the reduction in its leverage levels; the progress made on the strategy to diversify its feedstock profile; the continuous improvement
of its operating results; and the better performance of global petrochemical spreads.
Capacity-expansion and feedstock-diversification projects
Mexico Project
The project's construction reached 82% completion and the process of hiring and training Team Members to run the future industrial operation has already begun. Progress continued to be made
on pre-marketing activities, with the number of active clients reaching 276, or 32% more than in 2Q14.
On August 11, the subsidiary Braskem-Idesa withdrew the fourth installment of the project finance
in the amount of US$383 million or R$872 million.
Ascent
Ascent, an integrated project aiming to produce polyethylene under evaluation by Braskem with a group of investors, kept advancing. Ineos, LyondellBasell and Technip were chosen as the
technology suppliers for the project. These companies are also partners in the Mexico project, which might ensure commercial and operational synergies.
Other projects
The Plastics Chain Competitiveness Incentive Plan (PIC), which was developed to stimulate growth in Brazil's plastics chain, made progress on new fronts. In a partnership with Think Plastic and Aduaneiras,
the “Exporter Qualification Project” was created to increase exports of manufactured goods made from plastic.
Braskem was, for the third straight year, selected as a component of the Dow Jones Sustainability Index
Emerging Markets of the New York Stock Exchange (NYSE).
The Company, for the sixth time, was the winner of the Transparency Trophy of the National Association
of Finance, Administration and Accounting Executives (Anefac). And, for the first time, Braskem won the trophy for Best Annual Financial Statements 2013 in the category of companies with revenue over
R$5 billion.
3Q14 Earnings Release
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EXECUTIVE SUMMARY
Higher oil production, especially in the United States and Libya, diverted attention from the geopolitical issues in Iraq, Ukraine and Russia, helping to reverse the upward trend in oil prices observed in the second quarter.
The growth in oil demand, lower than estimated, also contributed to oil prices falling from levels of over US$100/bbl to the range of US$85-90/bbl.
The price of naphtha, the main feedstock used by the petrochemical industry, continued to follow the dynamics
of oil market and fell 6% in relation to 2Q14. The spreads1 of thermoplastic resins2 and key basic
petrochemicals3 widened by 21% and 7%, respectively, driven by lower naphtha prices and scheduled and
unscheduled maintenance shutdowns (USA, Asia and Europe), which helped to keep supply and demand
balanced.
Following the 0.6% contraction in Brazil's GDP growth in the second quarter, which was adversely affected by
fewer business days (World Cup) and lower industrial production, it was observed an improvement in economic
activity through the quarter fueled by the gradual recovery in consumer spending.
The Brazilian demand of thermoplastic resins reached 1,374 kton, up 5% from 2Q14, which is explained by the
better performance of the sectors associated with consumer goods as well as by third-quarter seasonality. Braskem’s sales followed this trend and amounted to 939 kton. In comparison with 3Q13, when demand was
adversely affected by the slowdown in industrial production and by the anticipation in sales volume in 2Q13,
sales by Braskem and the overall market grew by 5%.
In 9M14, the Brazilian market of thermoplastic resins was 4,031 kton, in line with the demand observed in
9M13 and reflecting the weak performance of the automotive, infrastructure and white goods sectors. In this scenario, Braskem’s sales amounted to 2,720 kton, contracting by 2% from 9M13.
Sales of PP in the USA and Europe business unit amounted to 470 kton, decreasing 2% from 2Q14, which is
mainly explained by a weaker European market. Compared to 3Q13, sales volume increased by 9%, benefitting from the recovery in local sectors, led by the automotive industry, construction, infrastructure and consumer
goods.
In the year to date, PP sales by the USA and Europe business unit came to 1,409 kton, 6% higher compared
to the 9M13, reflecting the improved macroeconomic scenario and the expansion in annual PP production capacity at the Seadrift plant, Texas.
Braskem’s consolidated EBITDA in 3Q14 was R$1,502 million. The stronger performance in relation to 2Q14 is
explained mainly by (i) the higher sales volume; (ii) the improvement in petrochemical spreads in the international market; and (iii) the average depreciation in the Brazilian real; which were partially offset by
(iv) the R$34 million expense related to the additional amount of R$75 million in the Tax Debit Renegotiation Program (Refis) (for more information, see Note 15. Taxes Payable to the financial statements for the third
quarter). In U.S. dollar, EBITDA amounted to US$660 million. Compared to 3Q13, EBITDA decreased 10% in
Brazilian real and 9% in U.S. dollar.
In 9M14, the Company posted EBITDA of R$4,269 million or US$1,857 million. Excluding nonrecurring effects,
EBITDA was US$1,755 million, increasing 3% from 9M13, positively impacted by the recovery in petrochemicals spreads, which followed the dynamics of the international market.
Reflecting the better operating performance, net income was R$230 million in the quarter and R$750 million in the the first nine months of the year.
On September 30, 2014, Braskem’s net debt stood at US$6,430 million, decreasing 3% from the end of 2Q14,
influenced by the 11% appreciation in the U.S. dollar against the Brazilian real in the end of the period. Financial leverage measured by the ratio of net debt to EBITDA in U.S. dollar decreased from 2.73x to 2.71x.
1 Difference between the price of petrochemicals and the price of naphtha. 2 65% PE (USA), 25% PP (Asia) and 10% PVC (Asia). 3 80% ethylene and propylene, 20% BTX (base Europe).
3
The federal government announced that the rate of refund under the “Reintegra” - Special Tax Refunds for
Exporters Program, which initially had been set at 0.3%, would increase to 3% as of October 1st. The measure aims to improve the competitiveness of manufactured goods exporters by refunding a portion of the federal
taxes levied on their exports.
The scenario, however, remains challenging due to the weak growth of the Brazilian economy and the loss of
competitiveness in its industry. In this context, the federal government is expected to continue working in
measures that strengthen the growth of domestic industry, with emphasis on cost and availability of feedstock and energy.
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PERFORMANCE
Note that as a result of the decision to maintain its investments in chemical distribution, which are the assets relating to Quantiq, Braskem restated its consolidated quarterly results for 2013 to include the result of this
operation.
Net Revenue
In 3Q14, Braskem’s net revenue was US$5.1 billion, 6% higher than in 2Q14. In Brazilian real, net revenue was R$11.7 billion, increasing 8%, explained by the growth in sales volume and the 2% average U.S. dollar
appreciation between the periods. Excluding naphtha/condensate resale from the analysis, net revenue in the quarter grew by 3% in U.S. dollar and by 5% in Brazilian real.
Compared to 3Q13, consolidated net revenue in U.S. dollar grew by 7%, positively influenced by the higher prices, which followed the international market trend, and by the growth in resins sales volume. In Brazilian
real, consolidated net revenue grew by 6%.
Overseas sales revenue excluding naphtha/condensate resale amounted to US$2.0 billion, increasing 9% from 2Q14, mainly due to the higher sales volumes registered at the Polyolefins and Basic Petrochemicals units.
Compared to the same period in 2013, export revenue grew 7%, driven by higher PP sales volume at the USA and Europe unit and by the higher volumes exported by the Basic Petrochemicals unit.
*Exports of products made in Brazil
In 9M14, consolidated net revenue amounted to US$15 billion, increasing 5% from 9M13. Excluding
naphtha/condensate resale, net revenue was US$14 billion, increasing 3% year over year. The main factors in this improvement were the higher average petrochemical price, which followed the dynamics of the
international market, and the growth in total sales volume. In Brazilian real, consolidated net revenue ex-resale amounted to R$32.1 billion, increasing 12%, influenced by the average U.S. dollar appreciation of 8% between
the periods.
On the same basis, revenue from overseas sales came to US$5.5 billion, increasing 2% from 9M13, affected by the same factors.
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*Exports of products made in Brazil
Highlights by Segment
Capacity utilization rate
In 3Q14, the average capacity utilization rate of Braskem’s main products reflects the resumption of operations.
Despite the scheduled shutdown of the São Paulo cracker, which started in September, Braskem’s crackers operated at an average capacity utilization of 90%, reflecting the higher production at the Triunfo site after the
scheduled shutdown and the recovery in production at the Rio de Janeiro site.
The exception was the USA and Europe business unit, which carried out unscheduled shutdowns due to power
and feedstock supply issues.
Polyolefins
Brazilian market: the estimated market for polyolefins (PE and PP) in 3Q14 was around 1,052 kton, up 4%
from 2Q14, which is explained by the better demand from sectors related to consumer goods and third-quarter seasonality. Compared to 3Q13, when the market was impacted by the anticipation of a portion of sales volume,
the market expanded by 4% as well.
In 9M14, demand amounted to 3.1 million tons, in line with the level observed in 9M13.
Production: production volume in the quarter was 1,063 kton, increasing 12% from 2Q14, which is explained
by the resumption of operations at the Triunfo cracker after the scheduled shutdown and by the recovery in production at the Rio de Janeiro site. Compared to 3Q13, production volume was stable.
Domestic sales: following the market trend, Braskem’s sales in the quarter amounted to 767 kton, increasing
6% from the previous quarter, which supported a market share gain of 1 p.p. to 73%. Compared to 3Q13,
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sales volume increased 2%, reflecting the better demand from sectors associated with retailing and consumer
goods, which offset the weak performance of other sectors such as automotive.
Export sales: in 3Q14, export sales volume amounted to 317 kton, increasing 72 kton from 2Q14, driven by
sales opportunities overseas as well as in the Mercosul region. Compared to 3Q13, export sales increased 4%.
In 9M14, production volume was 2,997 kton, decreasing 6% from 9M13, reflecting the scheduled and
unscheduled maintenance shutdowns in the period. In this context, Braskem sold 2,228 kton in the domestic
market and 792 kton in the export market, representing decreases of 3% and 2%, respectively from 9M13.
Vinyls
Brazilian market: PVC demand in 3Q14 was 322 kton, increasing 7% from 2Q14, influenced by the normalization of inventories in the infrastructure and construction sectors, which had been impacted by slower economic
activity. Compared to 3Q13, when the chain was marked by signs of a destocking trend, PVC demand advanced by 6%.
Production: PVC production volume reached 170 kton, increasing 2% from 2Q14 and reflecting the good operating performance at the Alagoas and Bahia plants. Caustic soda production amounted to 117 kton,
increasing 4% from 2Q14.
Compared to 3Q13, when production was impacted by scheduled and unscheduled maintenance shutdowns, PVC production rose 31%. Meanwhile, caustic soda production grew 7%.
Domestic sales: Braskem's PVC sales volume in the quarter amounted to 172 kton, increasing 11% on 2Q14, influenced by stronger domestic demand. Braskem’s market share expanded by 2 p.p. to 54%. Compared to
3Q13, Braskem's PVC sales increased 19%, with its market share expanding 6 p.p.
Caustic soda sales volume in the quarter increased 10% from 2Q14, reflecting the stronger demand from the pulp and paper industry. Compared to 3Q13, caustic soda sales remained virtually flat.
In 9M14, PVC production amounted to 483 kton, increasing 14% from 9M13 and benefitting from the
normalization of operations at the new plant in Alagoas. PVC sales volume was 492 kton, increasing 4%. Caustic soda production and sales volumes came to 336 kton and 362 kton, respectively, virtually in line with
9M13.
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Basic Petrochemicals
In 3Q14, ethylene production amounted to 848 kton, increasing 7% from 2Q14, which is explained by the resumption of production at the Triunfo cracker after the scheduled shutdown and by the recovery in production
at the Rio de Janeiro site, which offset the scheduled shutdown of the São Paulo cracker that began in September. Compared to 3Q13, production volume decreased 2%.
Ethylene and propylene: the Company´s total sales reached 257 kton, increasing 5% from 2Q14 and reflecting
the higher propylene sales driven by the good performance of second-generation clients. Compared to 3Q13,
sales advanced 7%, influenced by opportunities in the export market.
Butadiene: sales volume was 98 kton, increasing 10% from the previous quarter, which is explained by the
recovery in production at the Triunfo site mentioned above. Compared to 3Q13, when production was affected by operating issues, butadiene production increased 8%.
BTX: sales volume amounted to 271 kton, up 15% from 2Q14, due to higher paraxylene production and
unscheduled shutdowns at producers in Europe, which created opportunities to export benzene. Compared to 3Q13, sales volume fell 10%, reflecting the lower production volume.
In 9M14, production of key basic petrochemicals was affected by the scheduled shutdown and decreased compared to 9M13. However, sales of ethylene and propylene grew 3% in the period, reflecting the higher
supply availability to third parties due to scheduled maintenance shutdowns at second-generation plants. BTX and butadiene sales volumes decreased by 10% and 3%, respectively, in relation to 9M13, reflecting the lower
production volume in the period.
Performance (tons) 3Q14 2Q14 3Q13 Change Change 9M14 9M13 Change
BASIC PETROCHEMICALS (A) (B) (C) (A)/(B) (A)/(C) (D) (E) (D)/(E)
Production
Ethylene 847,593 789,769 865,868 7% -2% 2,426,921 2,577,342 -6%
Propylene 347,649 312,023 392,956 11% -12% 983,405 1,157,344 -15%
Butadiene 97,404 88,775 88,129 10% 11% 276,533 293,738 -6%
BTX* 275,846 219,645 309,332 26% -11% 750,434 960,474 -22%
BTX* - Benzene, Toluene, Orthoxylene and Paraxylene
Performance (tons) 3Q14 2Q14 3Q13 Change Change 9M14 9M13 Change
BASIC PETROCHEMICALS (A) (B) (C) (A)/(B) (A)/(C) (D) (E) (D)/(E)
Total Sales
Ethylene/Propylene 256,770 243,390 240,824 5% 7% 723,701 700,394 3%
Butadiene 97,962 89,396 90,322 10% 8% 278,836 286,430 -3%
BTX* 270,604 235,501 299,025 15% -10% 738,949 817,982 -10%
BTX* - Benzene, Toluene, Orthoxylene and Paraxylene
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United States and Europe
Market: In 3Q14, demand for PP in the United States remained in line with the previous quarter. In Europe, demand decreased 3% due to the demand slowdown (seasonality). Compared to 3Q13, U.S. and European
demand remained relatively flat.
In 9M14, U.S. demand for PP increased 1% from 9M13, while demand in Europe remained flat.
Production: production volume in 3Q14 was 449 kton, declining 9% from 2Q14, which is explained by the
unscheduled shutdowns in the United States and Germany due to power and feedstock supply issues. Compared to 3Q13, when Germany underwent a scheduled maintenance shutdown, production grew 3%.
Sales: sales amounted to 470 kton, down 2% from 2Q14, which is explained by the deceleration in the European market. Compared to 3Q13, sales volume increased 9%, mainly due to the better performance of the
automotive and retail sectors in the United States as well as the higher product supply.
In 9M14, production increased 5% from 9M13, while sales rose 6%, reflecting the higher production and
recovery in the U.S. and European economies between the periods.
Cost of Goods Sold
Braskem's cost of goods sold (COGS) in 3Q14 amounted to R$10.1 billion, increasing 5% from 2Q14,
explained mainly by the higher sales volume. The 2% average U.S. dollar appreciation between the periods
had a negative impact of R$161 million.
Braskem acquires around 70% of its naphtha feedstock from Petrobras, with the remainder
imported from producers in North African countries and in Venezuela. The ARA naphtha price reference
for domestic supply (three-month moving average)
reached US$933/ton in 3Q14, up 2% from US$919/ton in 2Q14. The ARA naphtha price, which is the
reference for imported naphtha, stood at US$881/ton in the quarter, down 6% from 2Q14 (US$939/ton).
Regarding the average gas price, the Mont Belvieu price reference for ethane and propane decreased by
19% and 2% from 2Q14 to US$24 cts/gal
(US$175/ton) and US$104 cts/gal (US$542/ton), respectively. The decline is explained by the imbalance
in supply and demand resulting from the scheduled shutdowns in the quarter. In the case of USG propylene, the average price reference was US$1,562/ton in the period, increasing 2% from the prior quarter.
Compared to 3Q13, COGS increased 9%, driven by the increases in naphtha and propylene prices, which
accompanied the dynamics of the international market.
Performance (tons) 3Q14 2Q14 3Q13 Change Change 9M14 9M13 Change
UNITED STATES AND EUROPE (A) (B) (C) (A)/(B) (A)/(C) (D) (E) (D)/(E)
Sales
PP 470,286 478,584 432,208 -2% 9% 1,408,978 1,327,974 6%
Production
PP 449,263 492,804 438,160 -9% 3% 1,386,300 1,322,567 5%
(1) Does not include naphtha resale and Quantiq costs
Naphtha ; 47.9%
Ethane/ Propane
Propylene
Electric Energy; 2.3%
Natural Gas; 2.0%
Other Variable Costs; 8.2%
Labor; 3.0%
Services; 1.3%Others; 0.9%
Deprec / Amort; 5.2%
Freight;3.9%
COGS 3Q14 (1)
Gas as feedstock; 25.2%
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In 9M14, COGS amounted to R$30 billion, increasing 14% on the same period last year, which is mainly
explained by (i) the higher volume of naphtha/condensate resale; and (ii) the higher cost of feedstock, which followed the international market dynamics. The average U.S. dollar appreciation of 8% between the periods
also generated an impact of R$2.1 billion.
Selling, General and Administrative Expenses
In 3Q14, SG&A Expenses amounted to R$636 million, increasing R$31 million from the prior quarter.
Compared to 3Q13, SG&A expenses increased by 12%.
Selling Expenses in the quarter were R$301 million, increasing 7% and 22% from 2Q14 and 3Q13,
respectively, reflecting the higher sales volume and consequently higher expenses with product distribution.
General and Administrative Expenses amounted to R$334 million, increasing 4% or R$12 million from
2Q14. Compared to 3Q13, general and administrative expenses increased 5%. In both periods, the higher
expenses are mainly explained by the increases applied to health insurance policy and the adjustments to wages.
In 9M14, SG&A Expenses amounted to R$1.8 billion, increasing 13% from 9M13. This increase is mainly explained by (i) the increase in selling expenses due to the higher costs with storage and demurrage in the
first quarter; and (ii) the higher payroll expenses (collective bargaining agreement and wage adjustments).
EBITDA
Braskem’s consolidated EBITDA[1] amounted to R$1,502 million, increasing 33% from 2Q14. EBITDA margin
excluding naphtha resale stood at 13.4%, expanding 2.7 p.p.. The main factors that contributed to this result were (i) the higher sales volume; (ii) the better resin and basic petrochemical spreads in the international
market; and (iii) the 2% Brazilian real depreciation; which were partially offset by (iv) the R$34 million expense
related to the reopening of the Tax Debit Renegotiation Program (Refis) authorized by Federal Law 12,996 (for more information see Note 15. Taxes Payable to the financial statements for the third quarter). In U.S. dollar,
EBITDA increased 30% from 2Q14 to US$660 million.
Compared to 3Q13, EBITDA decreased 10% in U.S. dollar and 9% in Brazilian real. The reduction was mainly
due to (i) sales of resins and basic petrochemicals produced with a higher feedstock cost - the naphtha moving
average, the reference price for domestic supply in Brazil, increased 9%; and (ii) by the negative impact of R$34 million explained above.
[1] EBITDA is defined as the net result in the period plus taxes on profit (income tax and social contribution), the financial result and depreciation, amortization and depletion. The Company opts to present adjusted EBITDA, which excludes or adds other items from the statement of operations that help improve the information on its potential gross cash generation.
EBITDA is used by the Company’s management as a measure of performance, but does not represent cash flow for the periods presented and should not be considered a substitute for net income or an indicator of liquidity. The Company believes that in addition to serving as a measure of operating performance, EBITDA allows for comparisons with other companies. However, note that EBITDA is not a measure established in accordance with international financial reporting standards (IFRS) and is presented herein in accordance with Instruction 527 issued on October 4, 2012 by the Securities and Exchange Commission of Brazil (CVM).
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In 9M14, Braskem’s consolidated EBITDA amounted to R$4,269 million, increasing 16% from the same period last year. The main factors were (i) the positive nonrecurring impact of R$277 million in 1Q14 from the
divestment of a non-strategic asset; (ii) the recovery in thermoplastic resin spreads in the international market; and (iii) the 8% Brazilian real depreciation; which were partially offset by (iv) the additional R$65 million
provision for the Petros Plans and the negative impact from Refis of R$34 million. In U.S. dollar, EBITDA grew
by 8%. Excluding the nonrecurring positive impact from the asset divestment and the Refis, EBITDA in 9M14 increased by 10% in Brazilian real and 3% in U.S. dollar.
Net Financial Result
The net financial result was an expense of R$632 million in 3Q14, compared to the expense of R$478 million
in the prior quarter.
Braskem holds net exposure to the U.S. dollar (more dollar-denominated liabilities than dollar-denominated
assets), and any change in the exchange rate has an impact on the accounting financial result. On September
30, 2014, this net exposure was composed (i) in the operations, by 63% of suppliers, which was partially offset by 75% of accounts receivable; and (ii) in the capital structure, by 74% of net debt. Since the Company’s
operating cash flow is heavily linked to the dollar, the Company believes that maintaining this level of net exposure to the dollar in liabilities acts as a natural hedge, which is in compliance with its Financial
Management Policy. Virtually 100% of its revenue is directly or indirectly pegged to the variation in the U.S. dollar and approximately 80% of its costs are also pegged to this currency.
Since Braskem regularly exports part of its production and aiming to better reflect exchange variation in its
result, the Company designated, as of May 1st, 2013, part of its dollar-denominated liabilities as hedge for its future exports.
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As a result, the effect from the 11% U.S. dollar4 appreciation on the net exposure of liabilities not designated
as hedge accounting generated a negative impact on the financial result of R$25 million.
Excluding the effects from exchange and monetary variation, the net financial result in 3Q14 was an expense
of R$547 million, increasing by R$106 million from the expense in the prior quarter, which is mainly explained by (i) the exchange variation impact on the calculation of interest on dollar-denominated debt; and (ii) the
extraordinary expense of R$43 million in “interest expenses” line due to the reopening of Tax Debit
Renegotiation Program (Refis); which were partially offset by the gains on financial investments in Brazilian real. Compared to 3Q13, the net financial result increased by R$71 million.
On the same basis, the net financial result in 9M14 was an expense of R$1,472 million, R$159 million higher than in 9M13, due to the impact of exchange variation on the outstanding debt balance; the increase in the
CDI rate; the prepayment of shorter-dated debt in 1Q14; and the additional amounts included in the Refis tax amnesty program.
The following table shows the composition of Braskem’s net financial result.
Net Income
Braskem recorded net income of R$230 million in 3Q14, driven by the improvement in its operating result. In 9M14, the Company recorded net income of R$750 million, which is explained by the divestment of non-
strategic assets and the improvement in operating performance between the periods.
4 On September 30, 2014, the Brazilian real/U.S. dollar exchange rate was R$2.4510/US$1.00.
R$ million 3Q14 2Q14 3Q13 9M14 9M13
Financial Expenses (1,087) (523) (575) (2,187) (1,808)
Interest Expenses (348) (270) (308) (924) (834)
Monetary Variation (MV) (76) (77) (82) (239) (230)
Foreign Exchange Variation (FX) (373) 87 82 (232) 34
Net Interest on Fiscal Provisions (47) (27) (34) (105) (139)
Others (244) (235) (233) (687) (640)
Financial Revenue 455 45 38 517 492
Interest 82 61 53 187 131
Monetary Variation (MV) 16 6 6 39 14
Foreign Exchange Variation (FX) 348 (52) (66) 235 178
Net Interest on Fiscal Credits 3 18 29 29 69
Others 6 12 16 27 100
Net Financial Result (632) (478) (537) (1,670) (1,316)
R$ million 3Q14 2Q14 3Q13 9M14 9M13
Net Financial Result (632) (478) (537) (1,670) (1,316)
Foreign Exchange Variation (FX) (25) 35 16 3 213
Monetary Variation (MV) (60) (71) (76) (200) (216)
Net Financial Result Excluding FX and MV (547) (441) (476) (1,472) (1,313)
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Capital Structure and Liquidity
On September 30, 2014, Braskem's consolidated gross debt stood at US$10.7 billion. This amount includes the financing for the Mexico project in the amount of US$2,879 million that was received by the subsidiary Braskem-
Idesa as of 3Q14, which includes the fourth disbursement of project finance in the amount of US$383 million that was received on August 11, 2014. Since this investment is made through a project finance structure (70%
debt and 30% equity) in which the project’s debt will be repaid using its own cash flow, for the purpose of
analyzing the Company's debt this project will not be included.
In this context, Braskem's consolidated gross debt stood at US$7,781 million, down 4% from the balance on
June 30, 2014. At the end of the period, 68% of gross debt was denominated in U.S. dollar.
Cash and cash equivalents amounted to US$1,351 million, decreasing US$76 million from the prior quarter, due
to the U.S. dollar5 appreciation of 11% in the period and its respective impact on the cash balance in Brazilian
real.
As a result, Braskem's net debt decreased by 3% to US$6,430 million. In Brazilian real, net debt increased by
7% from 2Q14, influenced by the appreciation in the U.S. dollar mentioned above. The percentage of net debt
denominated in dollar was 74%.
In line with its strategy to maintain high liquidity and its financial health, the Company maintains stand-by
credit facilities in the amount of US$600 million and R$500 million. Note that these facilities do not include any covenants restricting withdrawals during times of Material Adverse Change (MAC Clause). Only prime banks
with low default rates (credit default swap) and high credit ratings participated in the transactions.
Financial leverage, as measured by the ratio of net debt/EBITDA in U.S. dollar, closed the quarter at 2.71x,
virtually in line with the ratio on June 30, 2014. In Brazilian real, the leverage ratio stood at 2.90x, increasing 11%, which is explained by the currency's depreciation in the period.
5 On September 30, 2014, the Brazilian real/U.S. dollar exchange rate was R$2.4510/US$1.00.
2.73x 2.71x
Jun 14 Sep 14
Net Debt/ EBITDA(US$)
-1%
2.62x2.90x
Jun 14 Sep 14
Net Debt / EBITDA(R$)
11%
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On September 30, 2014, the average debt term was 15.7 years (up from 15.3 years). Considering only the
portion of debt denominated in U.S. dollar, the average debt term was 21.5 years. The average debt cost on September 30, 2014 was 6.32% in U.S. dollar and 9.31% in Brazilian real, compared to 6.17% and 8.70%,
respectively, in the prior quarter.
The following charts show Braskem’s gross debt by category and indexer.
The following chart shows the Company’s amortization schedule as of September 30, 2014.
Only 3% of the Company’s total debt matures in 2014, and its high liquidity ensures that its cash and cash
equivalents cover the payment of obligations maturing over the next 27 months. Considering the deadline for withdrawing the stand-by credit facilities, this coverage is 37 months.
Brazilian and Foreign Gov.
Entities22%
Capital Market
56%
Gross Debt by Category
CDI14%
BRL - PRE5%
USD-PRE60%
USD-POS7%
TJLP12%
Selic1%
Gross Debt by Index
Banks 22%
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CAPITAL EXPENDITURE:
In 9M14, Braskem made investments of R$1,968 million (excluding capitalized interest and the
funds from the project finance and the non-controlling shareholder of the Mexico project).
Of this amount, 60% (R$1,184 million) was
allocated to industrial operations, including part of the amounts required by the scheduled
maintenance shutdowns at the São Paulo and Triunfo sites that were concluded in October and
April, respectively. The Company also allocated around 30% (R$622 million) to the construction
of the new petrochemical complex in Mexico.
The remainder is related to other ongoing projects, such as: (i) the investments for the
production of UTEC in La Porte, Texas; and (ii) the expansion and conversion of one of its
polyethylene production lines in Bahia to
produce metallocene-based LLDPE.
ACQUISITION OF SOLVAY INDUPA:
On June 24, 2014, the General Superintendence of Brazil’s antitrust agency CADE issued a report against the approval of the transaction to acquire the assets from Solvay Indupa given its understanding that it potentially
infringes antitrust principles. As provided for by law, the report issued by the General Superintendence is
neither final nor binding, but rather represents the first step in the process of analyzing the transaction, which will now be examined by the board of CADE.
On July 24, the Company filed an appeal explaining its understanding that the relevant market for PVC and caustic soda is international, which is consistent with the decisions that CADE has been issuing for years, for
which reason the transaction does not pose a threat to free competition.
With regard to the Tender Offer to the non-controlling shareholders of Solvay Indupa made in February 2014 in the amount of 2.40 Argentine pesos per share, Braskem informs that the process is still under analysis by
Argentina’s securities and exchange commission (CNV).
The plenary of CADE shall evaluate this process until the end of 2014.
15
PIPELINE OF MAIN PROJECTS:
Consistent with its middle and long term strategy, Braskem focuses on investments that improve the competitiveness and diversification of its feedstock profile and strengthen its leadership in the Americas and in
the biopolymers industry.
6 The project's fixed investment (capital expenditure) is estimated at US$3.2 billion. The total investment of US$4.5 billion includes the project's capex, working capital requirements and interest payments.
Project Capacity (kton/y)
Investment
Ethylene XXI (integrated ethylene/PE project)
Location: Coatzacoalcos, Mexico
1,050 ~US$4.5 bn6
JV between Braskem (75%) and Idesa (25%).
Long-term contract (20 years) with PEMEX-Gás based on the Mont Belvieu reference gas price.
In addition to gaining access to feedstock at attractive conditions, the project aims to meet the growing demand in Mexico for PE of around 1.9 million tons, of which around 70% is currently met by imports.
Earthmoving works concluded.
In October 2012, the Engineering, Procurement and Construction (EPC) contract was signed with a consortium for the complex’s construction formed by Odebrecht (40%), Technip (40%) and ICA Fluor (20%).
The US$3.2 billion project finance structure was concluded in December 2012:
o SACE: US$600 million;
o IADB and IFC: US$570 million A loan to be complemented by a US$700 million B Loan;
o Brazilian Development Bank (BNDES): US$623 million;
o BancoMext and NAFIN: US$400 million;
o EDC: US$300 million.
Construction: in 3Q14, the project reached 82% physical completion. Over 660 pieces of equipment and 50,000 tons of material have already been delivered to the site, and the process of hiring and training Team Members to run the future industrial operation has already begun. The work is currently focusing on: (i) installing equipment; (ii) assembling the metallic structures; (iii) installing the electrical cabling and instruments; and (iv) concluding the tests of the automation system.
Project finance – withdrawal of disbursements by the subsidiary:
o First disbursement on Jul/24/2013: US$1,484 million;
o Second disbursement on Nov/6/2013: US$547 million;
o Third disbursement on Apr/8/2014: US$465 million;
o Fourth disbursement on Aug/11/2014: US$383 million.
Priorities:
o Concluding the engineering and procurement activities, maintaining good productivity on mechanical assembly by making progress on construction and hiring qualified workers;
16
BRASKEM’S COMPETITIVE ADVANTAGES:
Plastics Chain Competitiveness Incentive Program (PIC)
The Plastics Chain Competitiveness Incentive Program (PIC), which was created in partnership with Abiplast - the Brazilian Plastics Industry Association - to develop structural programs that promote the competitiveness
and growth of the country's plastics manufacturing industry, registered the following highlights in the quarter:
Launch of the Innovation Management and Support Program. The program's aim is to promote the
development of innovative projects in the industry by drawing on the expertise of a consulting firm
specializing in innovation, which will help companies to structure and develop their projects. The program will also facilitate access by plastic manufacturers to existing credit facilities for innovation.
The Business Development Program, which was created in partnership with the Dom Cabral Foundation (FDC), seeks to support improvements in the management practices of participating entrepreneurs through
discussion of a wide range of topics, such as logistics and supply chains; strategy and competitiveness,
process management; costs and finances; governance; succession and innovation.
Exporter Qualification Project. Developed in partnership with Think Plastic and Aduaneiras, this project
works to increase the exposure of Brazilian manufacturers in the international market. Focusing on technical and market aspects, the program has already assisted some 70 manufacturers and over the next two years
hopes to grow by two-fold the volume of exports of manufactured goods made from PE and PP.
To showcase solutions and the versatility of plastic applications for the construction industry, Braskem and
its Clients participated in Concrete Show, a trade fair for contractors and construction professionals.
o Expanding the number of active clients, with a resulting increase in the volume of resin imports for resale and the structuring of the sales and logistics teams to support the growing pre-marketing demands;
o Training and development of the Team Members who will run the future industrial operation.
Comperj
Rio de Janeiro, Brazil
n/a To be determined The project aims to meet the growing demand in Brazil, add value to the
country’s natural resources and support its industrialization process.
Ascent
West Virginia, USA
n/a To be determined
The feasibility and engineering studies advanced as planned and a new ethane supply agreement was signed with Range. Considering the existing agreement with Antero, around 50% of feedstock supply has already been secured.
Ineos Technologies, Braskem’s strategic partner for technological licenses to produce polyethylene, will provide Ascent with Innovene S and Ascent G technologies to HDPE and LLDPE plants.
Technip was chosen as the technology supplier for the ethylene cracker and as the manager of the basic engineering project.
Lyondell Basell will supply the Lupotech T technology for the LDPE plant.
The project's ownership structure is still pending definition.
17
VISIO Program
Braskem continues to make progress in its commitment to develop the Brazilian plastics chain and create value for its Clients. Some of the
highlights of the quarter:
Electro Plastic, in partnership with Braskem, launched Black and White Plastic
Mulch (MPG), which is made from polyethylene resin and designed specifically for
citrus crops. The plastic mulch covers the ground to control weeds and maintain soil moisture and temperature. It also promotes root development, which in turn
promotes overall plant growth.
Braskem and Bimbo formed a partnership in the bakery segment in the United States
that culminated in the use of Green PE, which is made from renewable raw material, for the production of the packaging of the new bread line named Eureka! Organic
Bread, an organic and vegan product certified by the U.S. Department of Agriculture.
Innovation
Braskem launched a new PE grade for natural gas pipping network applications. The new resin is more
resistant to long-term mechanical stress, which imparts greater durability to products for this application. The process to obtain product approval from the main consumer companies is currently ongoing.
To meet the needs of the sanitary films market (packaging for toilet paper, paper towels and napkins),
Braskem launched a new low density PE resin. The resin meets all application requirements, particularly those related to stiffness, which is responsible for packaging stability and optical properties to enable better
product visibility.
Sustainable Development
Braskem continues to focus on strengthening its contribution to sustainable development. Its efforts in this
area are structured along three main fronts (i) increasingly sustainable Resources and Operations; (ii)
increasingly sustainable Products; and (iii) Solutions for a more sustainable life.
In the third quarter, the most notable activities on these fronts were:
The announcement of an international cooperation agreement with Amyris and Michelin for the development of a new technological route for the production of a type of isoprene, a raw material used by
the rubber industry. The companies will work together to develop a technology using plant sugars, such
as those found in sugarcane and cellulosic feedstocks, to produce renewable isoprene;
Braskem was chosen to chair the Life Cycle Assessment (LFA) theme-based chambers of the Brazilian
Business Council for Sustainable Development (CEBDS);
Adoption of the “CEBDS Agenda for a Sustainable Country,” which describes concrete actions to strengthen
competitiveness in Brazil and was delivered to the presidential candidates in this year’s elections;
Participation in two important initiatives, one of the World Bank and the other of the UN Global Compact, that seek to mitigate climate change by introducing carbon-pricing mechanisms;
Inclusion, for the third straight year, in the Dow Jones Sustainability Index Emerging Markets, the sustainability index for companies headquartered in emerging markets of the New York Stock Exchange
(NYSE);
The selection of "ser+realizador," the social investment project led by Braskem, as a reference in
Innovation in Local Development by the Center for Sustainability Studies (GVces) at FGV.
18
OUTLOOK:
In view of the lower-than-expected economic growth in the first half of the year, the International Monetary Fund (IMF) revised its forecast for world GDP growth in 2014 to 3.3%, down 0.1 p.p. from its forecast
announced in July. The weak performance of major euro zone economies, such as France, Italy and Germany, reduced the expectations for the region's GDP growth to 0.8% p.a.. On the other hand, as a result of the
strong expansion observed already in the second quarter, the U.S. economy is expected to grow by 2.2% this
year.
In China, the adjustments implemented by the federal government and the adversities in the world economy
led the country to post more stable economic growth. Despite the deceleration in the third quarter in relation to the second quarter, we expect a recovery in economic activity in the last quarter of the year driven by the
industrial production growth observed in recent months, which should lead China to end the year with GDP growth of 7.4%.
In Brazil, the GDP growth forecast for this year was once again revised downward, to 0.3% p.a.. The country's
industrial production has contracted due to a lack of competitiveness in relation to global markets and to weaker consumer spending, which has been affected by higher level of household indebtedness, which are
now incurring higher borrowing costs due to the interest rates increase.
The risk factors in the global scenario remain related to monetary and fiscal policy in developed and emerging
markets, which should help sustain a recovery and the sustainable growth of their economies in the middle
and long term.
In the petrochemical industry, the short-term scenario remains positive. However, petrochemical prices are
expected to follow the downward trend observed in naphtha prices and rebalancing the level of spreads. The main risk factors continue to be associated with geopolitical tensions in Ukraine and Iraq and more recently
with supply-demand dynamics in oil markets, given (i) the higher production by both OPEC and non-OPEC countries, especially in the United States, and (ii) slower growth in emerging economies.
Braskem’s strategy remains centered on strengthening its business by (i) increasing the competitiveness of its
feedstock matrix by reducing its cost and diversifying its profile; (ii) continuing to strengthen its relationship with Clients; (iii) supporting the creation of an industrial policy targeting the development of Brazil’s
petrochemical and plastics chain; and (iv) pursuing higher operational efficiency.
Braskem remains focused on negotiating new terms and conditions for renewing its naphtha supply agreement
and on renewing its power purchase agreements with CHESF, whose costs and supply are of critical importance
to the country's manufacturing industry.
Braskem has also concentrated its investments in maintaining and improving its assets and in priority, high-
return projects. The integrated project to produce polyethylene in Mexico continues to advance and the completion of construction and the plant's startup are expected by end-2015.
The feasibility studies for the Ascent project, the integrated complex in West Virginia to produce polyethylene
by taking advantage of the opportunities offered by U.S. shale gas, have been advancing and the technologies for the polyethylene plants and the cracker have already been defined. Around 50% of the feedstock supply
has been guaranteed already and the project team continues to make progress on finalizing new agreements.
In this context, Braskem remains firm in its commitment to growth and sustainable development and will
continue to proactively pursue opportunities to create value for their Clients, Shareholders and society without losing sight of the strong focus on financial health.
NOTE: (i) On September 30, 2014, the Brazilian real/U.S. dollar exchange rate was R$2.4510/US$1.00.
19
UPCOMING EVENTS:
3Q14 Earnings Conference Call
Portuguese
1:00 p.m. (Brasília)
10:00 a.m. (U.S. EST)
7:00 a.m. (Los Angeles)
3:00 p.m. (London)
Dial-in +55 (11) 2188-0155
Code: Braskem
English
2:30 p.m. (Brasília)
11:30 a.m. (U.S. EST)
8:30 a.m. (Los Angeles)
4:30 p.m. (London)
USA: +1 (866) 890-2584
Other countries: +55 (11) 2188-0155
Code: Braskem
INVESTOR RELATIONS TEAM:
Roberta Varella Fernando T. de Campos Daniela Balle de Castro Stephan A. Szolimowski Head of IR IR Coordinator IR Specialist IR Analyst Phone: (55 11) 3576-9266 Phone: (55 11) 3576-9479 Phone: (55 11) 3576-9615 Phone: (55 11) 3576-9513 [email protected] [email protected] [email protected] [email protected]
www.braskem.com.br/ir
20
EXHIBITS LIST:
EXHIBIT I: Consolidated Statement of Operations 21
EXHIBIT II: EBITDA Calculation 22
EXHIBIT III: Consolidated Balance Sheet 23
EXHIBIT IV: Consolidated Cash Flow Statement 24
EXHIBIT V: Production Volume 25
EXHIBIT VI: Sales Volume – Domestic Market 26
EXHIBIT VII: Sales Volume – Export Market 27
EXHIBIT VIII: Consolidated Net Revenue 28
Braskem, a world-class Brazilian petrochemical company, is the leader in the thermoplastic resins segment in the Americas. With 36 industrial plants, of which 29 are in Brazil, 5 in the United States and 2 in Europe, the Company has
annual production capacity of 16 million tons of thermoplastic resins and other petrochemical products.
DISCLAIMER
This press release contains forward-looking statements. These forward-looking statements are not solely historical data, but rather reflect the targets and expectations of Braskem’s management. Words such as "anticipate", "wish", "expect", "foresee", "intend", "plan", "predict", "project", "aim" and similar terms seek to identify statements that necessarily involve known and unknown risks. Braskem does not undertake any responsibility for transactions or investment decisions based on the information contained in this document.
21
EXHIBIT I
Consolidated Statement of Operations
(R$ million)
Note: as a result of the Management decision to maintain the investments in Quantiq, Braskem’s quarterly results for 2013 have been restated to include the results of this operation.
Income Statement 3Q14 2Q14 3Q13 Change Change 9M14 9M13 Change
CONSOLIDATED (A) (B) (C ) (A)/(B) (A)/(C ) (D) (E) (D)/(E)
Gross Revenue 13,476 12,565 12,572 7% 7% 39,671 35,294 12%
Net Revenue 11,724 10,853 10,938 8% 7% 34,420 30,186 14%
Cost of Good Sold (10,051) (9,600) (9,209) 5% 9% (29,975) (26,354) 14%
Gross Profit 1,673 1,253 1,729 33% -3% 4,444 3,833 16%
Selling Expenses (301) (282) (247) 7% 22% (853) (744) 15%
General and Administrative Expenses (334) (323) (319) 4% 5% (966) (872) 11%
Other Net Operating Income (expenses) (67) (15) (47) 349% 44% 108 (100) -
Investment in Subsidiary and Associated Companies (0) 1 1 - - 0 (2) -
Operating Profit Before Financial Result 970 635 1,118 53% -13% 2,734 2,115 29%
Net Financial Result (632) (478) (537) 32% 18% (1,670) (1,316) 27%
Profit Before Tax and Social Contribution 338 157 581 115% -42% 1,064 798 33%
Income Tax / Social Contribution (108) (33) (181) 233% -40% (313) (291) 8%
Net Profit 230 124 399 85% -42% 750 507 48%
Earnings Per Share 0.34 0.16 0.50 - - 1.01 0.63 60%
22
EXHIBIT II
EBITDA CALCULATION
(R$ million)
(i) Represents the accrual and reversal of provisions for the impairment of long-lived assets (investments, property, plant and
equipment and intangible assets) that were adjusted to form EBITDA since there is no expectation of their financial
realization and if in fact realized they would be duly recorded on the statement of operations.
(ii) Corresponds to results from equity investments in associated companies and joint ventures.
EBITDA Statement 3Q14 2Q14 3Q13 Change Change 9M14 9M13 Change
CONSOLIDATED (A) (B) (C ) (A)/(B) (A)/(C ) (D) (E) (D)/(E)
Net Profit 230 124 399 85% -42% 750 507 48%
Income Tax / Social Contribution 108 33 181 233% -40% 313 291 8%
Financial Result 632 478 537 32% 18% 1,670 1,316 27%
Depreciation, amortization and depletion 530 497 545 7% -3% 1,533 1,517 1%
Cost 472 440 475 7% -1% 1,380 1,364 1%
Expenses 58 57 71 2% -18% 153 153 0%
Basic EBITDA 1,500 1,132 1,663 33% -10% 4,266 3,632 17%
Provisions for the impairment of long-lived assets (i) 1 (1) (0) - - 2 40 -
Results from equity investments (i i) 0 (1) (1) - - (0) 2 -
Adjusted EBITDA 1,502 1,130 1,661 33% -10% 4,269 3,673 16%
EBITDA Margin 12.8% 10.4% 15.2% 2.4 p.p. -2.4 p.p. 12.4% 12.2% 0.2 p.p.
23
EXHIBIT III
Consolidated Balance Sheet
(R$ million)
* Includes the exchange variation of financial liabilities designated as hedge accounting (Note 14.1.1 (c) to the Financial Statements).
09/30/2014 06/30/2014 Change
(A) (B) (A)/(B)
Current 15,075 14,186 6%
Cash and Cash Equivalents 3,722 3,151 18%
Marketable Securities/Held for Trading 102 155 -34%
Accounts Receivable 3,049 2,799 9%
Inventories 5,111 5,118 0%
Recoverable Taxes 2,581 2,364 9%
Other Receivables 510 598 -15%
Non Current 33,925 32,306 5%
Marketable Securities/ Held-to-Maturity 33 23 47%
Compulsory Deposits and Escrow Accounts 212 212 0%
Deferred Income Tax and Social Contribution 1,245 706 76%
Taxes Recoverable 1,017 1,099 -7%
Insurance claims 188 163 16%
Investments 120 123 -2%
Property, Plant and Equipament 27,843 26,688 4%
Intangible Assets 2,844 2,851 0%
Outros 422 443 -5%
Total Assets 49,000 46,492 5%
09/30/2014 06/30/2014 Change
(A) (B) (A)/(B)
Current 12,802 12,597 2%
Suppliers 9,567 9,766 -2%
Financing 1,309 1,329 -2%
Project Finance 24 27 -12%
Derivatives 69 53 29%
Salary and Payroll Charges 491 437 12%
Dividends and Interest on Equity 5 5 -1%
Taxes Payable 674 525 28%
Advances from Customers 409 214 91%
Sundry Provisions 93 93 0%
Other Payable 163 149 9%
Non Current 28,683 25,534 12%
Financing 17,763 16,483 8%
Project Finance 6,967 5,447 28%
Derivatives 482 367 31%
Deferred Income Tax and Social Contribution 857 842 2%
Taxes Payable 880 820 7%
Sundry Provisions 453 454 0%
Advances from Customers 101 108 -7%
Other Payable 264 261 1%
Mutual Project Etileno XXI 638 475 34%
Others 279 277 1%
Shareholders' Equity 7,515 8,361 -10%
Capital 8,043 8,043 0%
Capital Reserve 232 232 0%
Profit Reserves 55 55 0%
Treasury Shares (49) (49) 0%
Other Comprehensive Income* (1,653) (577) 186%
Retained Earnings 824 548 50%
Non Controlling Interest 62 108 -43%
Total Liabilities and Shareholders' Equity 49,000 46,492 5%
ASSETS
LIABILITIES AND SHAREHOLDERS' EQUITY
24
EXHIBIT IV
Cash Flow
(R$ million)
Cash Flow 3Q14 2Q14 3Q13 9M14 9M13
Profit (loss) Before Income Tax and Social Contribution 338 157 581 1,064 798
Adjust for Net Income Restatement
Depreciation and Amortization 530 497 545 1,533 1,517
Equity Result 0 (1) (1) (0) 2
Interest, Monetary and Exchange Variation, Net 922 262 343 1,490 855
Cost on divestment in subsidiary - (315) - (277) -
Provision for losses - fixed assets 1 1 (33) 6 11
Cash Generation before Working Capital 1,792 601 1,435 3,815 3,183
Operating Working Capital Variation
Market Securities 50 (60) 18 (15) 119
Account Receivable (240) 12 (321) (204) (425)
Recoverable Taxes (82) 147 37 21 (73)
Inventories 25 478 (489) 5 (770)
Advanced Expenses 33 (106) 39 (56) (41)
Other Account Receivables 25 257 (62) (50) (43)
Suppliers (858) (43) (169) (1,168) 365
Advances from Customers 188 (116) (206) 60 (5)
Taxes Payable 181 (95) (126) 35 (135)
Other Account Payables 230 (135) (251) 280 112
Other Provisions (1) 5 56 (10) 15
Operating Cash Flow 1,343 947 (40) 2,712 2,301
Interest Paid (244) (306) (272) (744) (785)
Income Tax and Social Contribution (54) (20) (9) (96) (44)
Net Cash provided by operating activities 1,045 621 (322) 1,872 1,472
Proceeds from the sale of fixed assets 0 10 1 10 2
Proceeds from the capital reduction of associates - 315 154 315 387
Additions to Investment - - - - (0)
Additions to Fixed Assets (975) (1,500) (1,775) (3,632) (3,925)
Additions to Intangible Assets (5) (6) (4) (20) (12)
Effect of incorporation of associates cash - - - - 10
Financial Assets Held to Maturity 2 4 (10) 12 10
Cash used in Investing Activities (979) (1,178) (1,634) (3,315) (3,529)
Obtained Borrowings 2,859 2,677 4,147 7,193 8,732
Payment of Borrowings (2,298) (1,707) (1,794) (5,847) (6,176)
Dividends (0) (482) (0) (482) (0)
Non-controlling interests (0) (0) - (0) 33
Cash used in Financing Activities 561 488 2,353 864 2,589
Exchange Variation on Cash of Foreign Subsidiaries and Jointly Controlled Companies (56) 6 53 (35) 41
Increase (decrease) in Cash and Cash Equivalents 572 (63) 451 (613) 573
Represented by
Cash and Cash Equivalents at The Beginning of The Year 3,151 3,214 3,410 4,336 3,288
Cash and Cash Equivalents at The End of The Year 3,722 3,151 3,861 3,722 3,861
Increase (Decrease) in Cash and Cash Equivalents 572 (63) 451 (613) 573
25
EXHIBIT V
Production Volume
tons 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
Polyolefins
PE's 632,257 658,317 661,780 627,936 589,755 576,079 643,577
PP 436,029 397,996 406,989 386,128 391,370 376,927 419,559
Vinyls
PVC 146,877 146,676 129,546 159,480 146,042 167,314 169,999
Caustic Soda 115,321 110,585 109,108 102,319 108,191 111,611 116,528
Basic Petrochemicals
Ethylene 835,531 875,943 865,868 795,483 789,559 789,769 847,593
Propylene 372,137 392,251 392,956 348,251 323,734 312,023 347,649
Benzene 215,095 210,225 204,750 195,315 154,170 156,674 188,172
Butadiene 100,850 104,759 88,129 96,116 90,353 88,775 97,404
Toluene 41,742 49,836 57,978 51,853 67,797 46,960 30,003
Fuel (m³) 221,317 225,235 242,856 244,282 249,700 273,893 222,521
Paraxylene 44,930 47,527 30,437 3,287 15,876 491 43,098
Orthoxylene 22,592 19,196 16,166 6,903 17,099 15,520 14,574
Butene 1 11,380 13,556 15,106 11,179 13,606 14,959 13,216
ETBE/ MTBE 78,403 81,981 77,561 68,686 73,813 69,096 82,351
Mixed Xylene 15,840 21,060 16,264 35,503 27,166 37,943 32,261
Cumene 73,138 43,145 57,809 55,593 64,029 55,127 46,121
Polybutene 9,778 1,240 5,936 6,032 7,103 8,314 5,783
Aromatic Residue 34,795 37,226 41,710 35,077 36,010 34,725 30,373
Petrochemical Resins 2,599 3,670 3,740 3,868 3,951 3,999 2,459
United States and Europe
PP 427,757 456,650 438,160 463,372 444,233 492,804 449,263
PRODUCTION CONSOLIDATED
26
EXHIBIT VI
Sales Volume - Domestic Market – Main Products
tons 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
Polyolefins
PE's 438,717 455,612 436,403 434,930 433,973 436,371 452,673
PP 315,724 331,733 316,629 304,841 303,076 287,569 314,415
Vinyls
PVC 166,216 159,528 145,202 165,561 164,398 155,098 172,361
Caustic Soda 119,469 112,337 125,688 111,271 118,655 109,634 121,556
Basic Petrochemicals
Ethylene 130,854 131,634 136,720 132,589 133,711 123,573 122,726
Propylene 54,807 47,405 56,602 51,056 49,974 47,835 57,378
Benzene 101,778 110,930 121,229 116,572 118,953 115,531 125,214
Butadiene 57,460 49,130 50,815 53,349 59,662 54,857 48,994
Toluene 8,638 11,979 11,222 11,511 12,451 9,809 11,109
Gasoline (m³) 137,310 133,891 140,980 161,102 176,726 203,779 106,701
Paraxylene 2,997 23,745 32,605 2,409 4,098 - 33,482
Orthoxylene 21,050 20,841 18,980 7,022 14,367 18,031 17,133
Mixed Xylene 14,504 17,239 14,809 16,281 14,645 11,409 12,680
Cumene 64,817 52,592 57,286 59,418 61,905 52,299 49,597
Polybutene 2,244 3,001 3,276 2,386 1,841 2,379 3,116
Aromatic Residue 36,036 37,547 38,957 33,537 34,743 33,324 31,493
Petrochemical Resins 2,238 2,479 2,676 2,394 2,574 2,623 2,651
Domestic Market - Sales Volume
CONSOLIDATED
27
EXHIBIT VII
Sales Volume – Export Market – Main Products
tons 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
Polyolefins
PE's 174,247 189,692 210,338 203,774 155,094 139,631 192,889
PP 66,110 72,820 93,475 79,495 75,925 104,728 123,957
Basic Petrochemicals Unit
Propylene 40,288 54,582 43,902 40,396 39,856 68,170 72,258
Benzene 40,222 63,380 66,147 36,411 33,846 28,956 66,642
Butadiene 40,777 48,741 39,507 41,985 31,816 34,540 48,968
Toluene 24,821 31,621 38,947 44,239 44,103 58,143 17,023
Gasoline (m³) 66,774 103,664 95,586 86,946 71,637 49,812 103,534
Paraxylene 31,395 25,559 9,895 - 5,024 5,030 -
Butene 1 - 3,175 1,680 40 1,497 1,225 20
ETBE/ MTBE 61,689 81,480 76,788 70,324 74,926 64,203 78,343
Mixed Xylene 451 5,497 482 14,587 16,115 19,291 24,720
Polybutene 3,829 3,802 3,313 3,620 4,849 3,599 2,347
United States and EuropePP 430,872 464,893 432,208 462,719 460,108 478,584 470,286
Export Market - Sales Volume
CONSOLIDATED
28
EXHIBIT VIII
Consolidated Net Revenue
(R$ million)
R$ million 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
PolyolefinsDomestic Market 3,034 3,160 3,293 3,361 3,578 3,400 3,644
Export Market 824 911 1,179 1,183 951 990 1,282
Vinyls 636 614 628 671 697 628 684
Basic Petrochemicals (Most Relevants)Domestic Market
Ethylene/Propylene 586 508 638 575 679 590 603
Butadiene 208 183 132 141 198 191 150
Cumene 199 163 180 189 215 185 166
BTX 407 468 546 400 503 453 600
Others 345 347 387 395 426 487 306
Export Market
Ethylene/Propylene 125 148 159 136 142 230 256
Butadiene 148 156 92 135 109 123 159
BTX 278 337 325 213 255 241 266
Others 315 428 430 378 444 328 476
United States and Europe 1,606 1,565 1,732 1,846 2,042 1,942 1,947
Resale* 409 314 659 859 1,061 450 778
Quantiq 205 219 237 218 225 188 212
Others¹ 177 225 320 84 319 426 196
Total 9,501 9,747 10,937 10,784 11,843 10,853 11,724
*Naphtha, condensate and crude oil
¹Includes pre-marketing activity in Mexico
Net Revenue
